FINANCING
School districts have a few options available when it comes to financing capital improvements. The most common are to borrow funds, save and expend from a capital reserve, or the budget. The Board of Education engages the services of a fiscal advisor and bond counsel who are experts in municipal finance transactions to guide them through the process. Dollars needed, debt service payments, state aid implications and estimated cost to district residents are among the items considered during this process. A community referendum, on any proposed capital project is required regardless of the funding source(s) chosen.
This Capital Project Funding Options document provides some relevant details for each funding method.
Throughout the spring and summer months, the Board of Education and District continued to receive input from its fiscal advisor to evaluate the full project list and potential financing sources. Very early in the process, the Board of Education concluded that while all of the proposed renovations and repairs were necessary, and the recommended improvements would be beneficial to the entire Wantagh community, they wanted to structure any referendum in a manner that gave the community a choice as to the financing of such projects.
In addition, the Board of Education set a target to complete as much of the renovations and repairs as could be accomplished in a manner that was as close to budget neutral as possible. Budget neutral is defined as replacing expiring debt service payments included in the current budget with new debt service payments, net of state aid, at roughly the same level.
With budget neutrality as the target, the entire project list (with consideration given to the prioritization assigned by the Capital Improvement Committee), was grouped into categories as follows:
Potential Proposition #1: New debt of $39.5 million
Budget neutral
Potential Proposition #2: Athletic Fields, Playgrounds and District Auditorium totaling $16 million
$11 per month/$130 annually for average homeowner
Potential Proposition #3: High School Library and Cafeteria, Bathrooms and Kitchens $14 million
$9 per month/$106 annually for average homeowner
Remaining projects to be financed through the annual budget and/or Capital Reserve.
The specific project details in each category can be found by clicking here.
Capital Reserve
Education Law allows a district to establish a capital reserve, fund it and expend funds from this reserve for capital projects. Both the establishment and expenditure of funds from a capital reserve require community approval. When a capital reserve is established it is required to include the following components: maximum amount of money to be deposited, source of the funding, length of time the reserve is permitted to be funded and types of projects the reserve will be used for.
Wantagh has been using capital reserves since 2014. The first was completely funded and all funds expended and the second is still active. A summary of each is listed below.
Capital Reserve #1 March 2014
Capital Reserve #2 May 2018
Bonds
Financing capital improvement and repairs through the sale of capital bonds is a financing method used by many municipalities. In the case of a school district, community approval must be secured through a referendum in order to sell municipal bonds. Bonds are sold competitively in the open market and are awarded to the respondent with the lowest net interest cost to the district. There are a host of interrelated events that make the actual financing complex. For example, from the receipt of a building permit to actual construction, length of time the money can be borrowed and held, market conditions and interest rates at the time of borrowing, structuring level repayments in a timeline that closely matches receipt of state aid, are all items to be considered. Most items and the timing of such are outside the control of the Board of Education or the District. As such, the professionals that guide the District through the process, and the decisions that the Board of Education and District make are based on ready available information at the time the decision is made.